The Economic Ascendency of China and India

The Economic Ascendency of China and India

Nicholas Platt, Asia Society President Emeritus

Remarks by Ambassador Nicholas Platt, Asia Society President Emeritus

Asia Society AustralAsia Centre
Asia Foreign Policy Luncheons in Sydney, Melbourne and Perth
15-19 July 2004

On June 15, 2004, an American delegation led by Henry Kissinger and George Shultz met in Beijing with Chinese counterparts for a new forum called the Unofficial High Level Dialogue. As a participant I heard Dr. Kissinger describe a changing world order in which “a global shift in the balance of power is underway from the Atlantic to the Pacific.”

When I began my Foreign Service career in Asia back in 1964 as a China Analyst in Hong Kong, the balance of power was clearly centered in Europe. The Cold War and competition with the Soviet Union shaped America’s posture in Asia, as everywhere else. We still considered Peking a Communist bloc partner of Moscow and were locked in the hostile residue of the Korean War and the McCarthy era.

China’s population was 700 million, the economy was small and stagnant, and her politics tense, soon to explode in the chaos of the Cultural Revolution. India, which traditionally kept itself apart from East Asia and was engaged in a humiliating border war with China, sympathized with the Soviets, who in turn kept the Indian economy afloat with supplies of commodities and weapons. Accordingly, our relationship with India ranged from the prickly to the poisonous.

Japan, our enemy turned strong ally against communism, was on the rise, protected by our security relationship, its economy stimulated by the Korean war and its aftermath. Korea’s annual per capita income was below $100, but the authoritarian Park Chung Hee government was just beginning the process of unleashing the forces of a market economy. Taiwan, similarly a police state under Chiang Kai Shek, was just starting its spectacular rise to prosperity and democracy with a successful land reform program.

In Southeast Asia the US, still convinced that China and the Soviet Union were operating as a united bloc behind North Vietnam’s attacks on the South, was about to embark on large scale involvement in the war. We got our first news of the Tonkin Gulf incident in 1964 at our offices in Hong Kong. The Resolution which committed us irrevocably followed soon after. The Association of Southeast Asian Nations (ASEAN) was in the process of forming, a loose group of small, primarily agricultural economies, the dominoes we were determined to protect from the influence of China and the Soviet Union.

Overt Sino-Soviet hostility grew exponentially during the sixties. As the head of China analysis at the State Department in 1969 I reported Soviet armored vehicles crossing the frozen Ussuri River, surrounded by hordes of Chinese beating them with sticks. Nixon’s opening to China exploited Beijing’s extreme sense of threat and his own desire to extricate us from Vietnam. His visit to Beijing in 1972 broke the bipolar mold. As a junior staff member, I watched with fascination as the events of the trip, covered extensively in prime time US TV, created in one week the bipartisan consensus behind a US relationship with China. The Shanghai Communique sidestepped the Taiwan issue and permitted us to start in 1973 (with the establishment of the Liaison office) developing the trade and investment ties that have become the basis for our huge current relationship. Geo-strategically, the establishment of a political framework for normal Sino-American relations was the beginning of the end for the Soviets. Perhaps more important and enduring, the elimination of Sino-American confrontation and the end of the Vietnam War stabilized East Asia, facilitating the onset of unprecedented decades of explosive economic growth that enveloped virtually all the countries of the region.

Fast forward during the intervening years. The story is mostly economic. The growth of the ASEAN tigers, China’s quadrupling of it’s GDP, the collapse of the Soviet Union, India’s economic reforms are all part of the phenomenon creating the shift of strategic weight away from Europe and toward Asia. All these changes have been accompanied by a general, if jagged thrust forward of democracy (except in China) and personal freedom, and more recently, in some areas, the emerging challenge of radical Islam.

Now, at a time when world attention is focused on the Middle East, Asia is increasingly cohesive and prosperous. Relations between the major countries and economies --China, Japan, Korea, and India-- are stable and improving, bound by growing regional trade and investment. China and India both have GDP growth rates exceeding 10%, and are trading increasingly with each other.

Looking ahead, the participants at our meeting in Beijing sought a world order in which the powers would focus less on balancing each other off than in concerting leadership to solve common problems. Sustaining the pace of growth and jobs, primary concerns to China and India, cannot be managed with the current structure of energy consumption, pollution and use of natural resources. China, Korea, the US and Japan all will have to take care of aging populations and will need to share expertise on medical practice and financial instruments. The struggles against radical Islam and HIV/AIDS can only be handled through joint effort. These will be the issues of the decades ahead in a Pacific Century.

Those of us who have tracked US Asian relations have felt the shift coming for a long time, but the evidence over the past decade or so has been overwhelming. Asia’s weight in the world economy has grown rapidly and is approaching 40%. And US interaction with Asia economically, politically and culturally has exploded. Trade relations with Asia are robust. 37% of our imports come from Asia. 27% of our exports go there. The influence of Asia on our visual arts, film, fashion, food, and photography has been pervasive. The Asian American minority has grown, too and come into its own. This is the context in which the Asia Society has operated over the past twelve years. Our job has been to position ourselves to catch this wave, and then to ride it for all it is worth.

The AustralAsia Centre has been integral to this process. Kudos to Hugh Morgan, Dick Wolcott and Prue Holstein. Since the launch in 1977, the Centre has succeeded in its objectives of delivering on a consistent basis, access for its corporate members to goverrnment leaders, senior government officials and business leaders from countries from across the Asian region. Some of the more notable guests have included, Prime Minister of Japan - HE Junichiro Koizumi, Senior Minister of Singapore, Lee Kuan Yew, Prime Minister of Singapore, Mr. Goh Chok Tong, former President of the Philippines, the Hon. Fidel Ramos, Rupert Murdoch AC, Chairman & Chief Executive, News Corporation, Narayana Murthy, Chairman & Chief Mentor, Infosys and David Eldon, Chairman, Hong Kong Shanghai Banking Corporation and many more.

The Centre has been able to do this through leveraging its own connections as well as the extensive networks of the Asia Society. The Centre has also been able to leverage these networks to attract prominent American guests speaking on Asia such as the Hon. Madeleine Albright, the then US Secretary of State and more recently Richard Armitage, Deputy Under Secretary of State to enable the Centre's audience to better understand the American position on Asia.

In addition to offering a strong business and policy programme designed to inform about developments in the Asian region, the Centre has also been successful in developing a cultural programme as a complement to its business/policy programming to broaden understanding about Asian countries and their cultures. The Centre has staged Asian and Asian-Australian writers panel discussions at the Melbourne International Writer’s Festival, and the Sydney Writer’s Festival along with many Meet the Author programmes. Amy Tan, V.S.Naipaul, Vikram Seth, Xinran Xue are just a few of the more prominent authors.

The Centre has staged two major art exhibitions - Treasures of Asian Art, Selections from Rockefeller collection of Asian art, and Crossing Boundaries, Bali: A Window into 20th Century Indonesian Art.

Through the prominence of the Centre's speakers and the high quality of its programming, the Centre succeeds in generating wide media coverage which brings to a wider public forum the importance of Australia's relationships with countries within the Asian region.

Looking Ahead. Questions to for Americans and Australians to Consider Together.

1.China

--Can It Sustain Growth? Are the Resources available worldwide to sustain a 9% compound growth rate?
--Environment? Vile now, how later? Water?
--Population aging. Christmas tree now-light bulb later. (Same for Japan, Korea, Australia, less US) “Old before Rich”
--Will political reform catch up to economic reform?
--Taiwan?

2. India

--Can it build the infrastructure needed to sustain growth?
--Political system stable chaos- business as usual despite change in leadership. Monmohan Singh and Chidambaram, original authors of reform
--Can India sustain regional peace and stability, détente with Pakistan despite threat of Islamic militants

3. Japan

--Play more active political/military role in region, in line with economic stature, resumption of growth? People have written Japan off. Not me. Korea and relationship with China are the keys.
--Deal with aging population? “Rich before old?

4. Korea

--Three objectives: a. end war, 2. end the nuclear threat, 3. share the prosperity. These are neighborhood problem. Can we solve them together?

5. Southeast Asia

--How will the region cohere and compete in the context of Chinese and Indian growth?
--Who will lead? Takshin now, who later. Indonesia? 2nd democratic chapter phenomenon? Like Philipinnes?
--How will ASEAN Islamic societies deal with deal with their radicals?

6. US

--Will we stay engaged? No choice. We have been a Pacific power for 100 years. Our security and prosperity are intertwined inextricably with the stability and growth of the region.
Example: WalMart trade with China 1% of China’s GDP, ie $14 billion last year

July 15, 2004
by admin